To speed up the resolution process of insolvent companies, the government has proposed a rule-based system for resolution professionals (RPs) to determine the value of claims submitted by various creditors of an insolvent company. Under the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 tabled in the Lok Sabha last month, the RPs will have a “quasi-judicial authority” to ascribe values to the claims made by different creditors of a company that has gone into insolvency.
This is a major shift from the current practice where RPs have been “arbitrarily” doing the claim assessment. There have been instances when RPs would reject the claims made by the creditors or put a “notional” value to the claims. In such cases, the aggrieved parties would approach National Company Law Tribunal (NCLT) leading to significant delays in the resolution process. However, the relevant amendment would likely reduce the disputes by giving powers to RPs to determine the claim values based on a set of rules.
End of arbitrary assessment: The new rule-based mandate
The Section 18(b) of the IBC provides that the interim resolution professional is required to receive and collate all the claims submitted by the creditors after the public announcement of the insolvency proceedings. However, the amendment bill clarifies that while collating the claims, the interim resolution professional can verify such claims and also make a determination of such claims.
“For the removal of doubts, it is hereby clarified that the interim resolution professional, while collating the claims, shall verify them, and, if required, determine the value of such verified claims,” as per the amendment bill.
“The proposed amendment significantly shifts the role of the RP from merely collating claims to exercising wider powers to verify and determine them. This has broad implications as it will help ensure that the committee of creditors is properly represented, which in turn will affect the fate of the company,” said Pranay Chitale, partner at Chitale Verma & Associates.
Industry reaction and the road ahead for claim determination
Under the proposed regulations, the government will come out with a separate set of rules to clearly state the circumstances and methods to determine the claim value by RPs. “The power of determination of claims would entail making a best estimate of the value of a claim which is not precise by reasons of contingency or otherwise,” said Prateek Kumar, partner at Khaitan & Co.
Experts said that by allowing RPs to take a call on the claim values would likely save time because the current system is prone to disputes. “Where the claim amounts are clear from the documentation submitted with the RP, the RP may not be required to determine any value, and may only be required to collate and verify the claims. But the power to determine may kick in when the value of claim is not precise. Such powers are also available to the liquidator under Section 41 of the Code where a company has gone for liquidation,” said Kumar.
Additionally, this move will act as a filter to weed out genuine claims from fictitious ones at the very outset. However, there are concerns the claims determined by the RPs will still be contested by aggrieved creditors. “Safeguards will need to be put in place to ensure that this does not become a new source of disputes before courts, leading to delays in the resolution process,” said Verma.
The finance minister Nirmala Sitharaman introduced the IBC amendments Bill in the Lok Sabha on August 12, by including provisions related to group insolvency, cross-border cases, and a creditor-led process to expedite resolution of bankrupt companies. The bill has been referred to the select committee.